Taxpayers who received large refunds earlier this year may be able to get more of their money included in their paychecks during the rest of 2018 by using the Withholding Calculator on IRS.gov. According to the Internal Revenue Service, most taxpayers – more than seven out of 10 – receive refunds averaging around $2,800. Typically, taxpayers who receive large refunds could receive more of their money throughout the year, rather than waiting until they file their tax return after the end of the year.
Here's another reason to revisit your tax withholding: Just over 2 in 10 taxpayers will owe money to the IRS next year.
On the other hand, GAO said, nearly three-quarters of taxpayers will have withheld too much during 2018 and will receive a refund next year.
Earlier this year, the Treasury Department and the IRS released updated withholding tables to reflect the new Tax Cuts and Jobs Act.
Changes stemming from the new law include the end of personal exemptions, the doubling of the standard deduction and lower individual income tax rates.
The withholding tables are guidelines your employer follows in order to deduct the appropriate amount of income taxes from your paycheck.
They also work with Form W-4, which you can use to tailor the taxes withheld from your pay.
The GAO also found that under the old tax law, 18 percent of taxpayers — roughly 27 million people — would have not withheld enough money.
Here's how to review your pay stub and head off a surprise tax bill from the IRS in 2019.
Reviewing your W-4 is a good practice in any tax year. If not enough is withheld, you'll owe money come tax time. Pay too much, and you end up with a large refund.
The IRS also released an updated version of its withholding calculatorto help taxpayers figure out how much to have deducted from each paycheck. You may also want to cross-check that number with your CPA or tax preparer to make sure it's best suited for you.
"You may have different circumstances now compared to when you started working at your employer," said Melissa Labant, director of tax policy and advocacy at the American Institute of Certified Public Accountants.
Major life changes, including having a child or getting married, may warrant an update to your withholding.
For reference, here are the new income tax brackets for married couples.
In the past, it may have made sense for people who itemize deductions to claim more allowances on their W-4 and have less tax withheld.
This may no longer be the case since the standard deduction has nearly doubled to $12,000 for singles and $24,000 for married couples who file jointly.
About 49 million taxpayers — 28 percent of filers — itemize, according to the Urban-Brookings Tax Policy Center.
Now that the standard deduction has doubled, filers who once itemized may no longer do so. That means they may not claim as many allowances on their W-4.
"Given the changes in the tax code, it's a good time to look at your W-4," Labant said. "You don't want any surprises, especially when that surprise is a large balance due come tax time."
You received a tax refund from the Feds and maybe one from the state in which you live. Good for you, right?
Sure, of course… who wouldn’t like a check that adds to the balance in your bank account?
The amount of your tax refund could enable you to pay off or pay down lingering debt, add to or create an emergency fund, or maybe take a vacation. With this money, you now have choices abound and a buffet of options available. It’s like a kid locked in the candy store overnight.
If your brain is titillated by the idea of turning the check into a shopping spree, you’re not alone.
The pleasure center in our brain is programmed to get all warm and fuzzy at the prospect of fun, rewards and “stuff.” The pleasure center also feels denied and sad if the prospect of doing something with the found dollars isn’t as satisfying as expected.
We are pushed and pulled by the battle between what we want and what we need, and sometimes the lines become blurred. Sometimes we make the wrong decisions and after consideration, we live in deep regret that a good opportunity was squandered.
Here are eight steps to consider when that tax refund is waiting for your decision.
Write down your options.
Make a note of the benefits of each possibility.
Eliminate the options that don’t provide enough positives.
Consider whether you can split the refund between several choices.
Wait 24-48 hours before making a decision.
Recheck your choices.
Apply your refund check according to your best decision.
Don’t look back!